Weakness in Technology Stocks Pressures Stock Indexes

Weakness in Technology Stocks Pressures Stock Indexes

The S&P 500 Index SPY today is down -0.16%, the Dow Jones Industrial Average DIA is up +1.41%, and the Nasdaq 100 Index QQQ is down -1.23%. June E-mini S&P futures (ESM26) are down -0.14%, and June E-mini Nasdaq futures (NQM26) are down -1.16%.

Stock indexes are mixed today, with the Dow Jones industrials posting a new all-time high. The broader market is under pressure today amid weakness in technology stocks. Broadcom is down more than -15% to lead chipmakers lower after its forecast for artificial-intelligence revenue in the current quarter fell short of expectations. Also, CrowdStrike Holdings is down more than 6% to lead cybersecurity stocks lower, despite reporting better-than-expected Q1 earnings, as the report wasn’t strong enough to lift the stock, which has more than doubled from a March low. Strength in managed healthcare stocks today is helping push the Dow Jones Industrial Average to a record high.

Weaker crude oil prices are a positive factor for stocks and bonds, with WTI crude oil down more than -3% today after the US late Wednesday said Israel and Lebanon agreed to a ceasefire if Hezbollah also stops fighting and withdraws militants from areas near the border with Israel. The agreement would require the Lebanese army to take over after the withdrawal of Israeli troops. Iran insists a deal with the US requires a ceasefire in Lebanon. Iranian Foreign Minister Abbas Araghchi said that “Communications between Iran and the US have not been cut off, but no tangible progress has been achieved in the negotiating process.”

Today’s US economic news was mixed for stocks after weekly jobless claims rose more than expected to a 3.75-month high and Q1 nonfarm productivity was revised lower. Conversely, Q1 unit labor costs were unexpectedly revised lower, easing concerns over wage pressures.

US weekly initial unemployment claims rose +13,000 to a 3.75-month high of 225,000, showing a weaker labor market than expectations of 215,000.

US Q1 nonfarm productivity was revised downward to 0.3% from the previously reported 0.8%, weaker than expectations of 0.4%. Q1 unit labor costs were unexpectedly revised downward to 1.8% from 2.3%, weaker than expectations of an upward revision to 2.4%.

The markets are discounting a 2% chance of a +25 bp rate hike at the next FOMC meeting on June 16-17.

The generally favorable Q1 earnings season is winding down. As of today, 84% of the 485 S&P 500 companies that reported Q1 earnings have beaten estimates. Q1 S&P 500 earnings are projected to climb +12% y/y, according to Bloomberg Intelligence. Stripping out the technology sector, Q1 earnings are projected to increase around +3%, the weakest in two years.

Overseas stock markets are mixed today. The Euro Stoxx 50 is up +0.51%. China's Shanghai Composite closed down -0.64%. Japan's Nikkei Stock Average closed down -1.36%.

September 10-year T-notes (ZNU6) today are up +8 ticks, and the 10-year T-note yield is down -3.6 bp to 4.459%. T-note prices are moving higher today, supported by a -2% decline in WTI crude oil prices, which has lowered inflation expectations. The 10-year breakeven inflation rate fell to a 6-week low of 2.366% today. Fed-friendly US economic news was also positive for T-notes, following weekly jobless claims that rose more than expected and Q1 unit labor costs that were unexpectedly revised lower.

European government bond yields are moving lower today. The 10-year German Bund yield fell from a 1.5-week high of 3.043% and is down -1.5 bp to 3.021%. The 10-year UK gilt yield is down -2.7 bp to 4.904%.

Eurozone Apr retail sales fell -0.4% m/m, weaker than expectations of -0.3% m/m.

Swaps are discounting a 98% chance of a +25 bp ECB rate hike at its next policy meeting on June 11.

Chipmakers and AI-infrastructure stocks are slumping today, led by a -15% plunge in Broadcom AVGO, the largest decliner in the Nasdaq 100, after giving an outlook that was seen as underwhelming, given the industry’s AI-related demand. Also, Micron Technology MU, ARM Holdings Plc ARM, and Marvell Technology MRVL are down more than -5%, and Applied Materials AMAT and Lam Research LRCX are down more than -3%. In addition, KLA Corp KLAC, Intel INTC, Qualcomm QCOM, Analog Devices ADI, and ASML Holding NV ASML are down more than -2%.

Cybersecurity stocks are retreating for a second day today, led by an -8% decline in CrowdStrike Holdings CRWD after its Q1 earnings beat wasn’t strong enough to lift the stock that has more than doubled from a March low. Also, Palo Alto Networks PANW and Cloudflare NET are down more than -2%, and Okta OKTA is down -0.83%.

Cryptocurrency-exposed stocks are falling today, with Bitcoin GLXY is down more than -4%, and MARA Holdings MARA and Riot Platforms RIOT are down more than -3%. Also, Coinbase Global COIN is down -0.44%.

UnitedHealth Group UNH is up more than +6% to health insurance stocks higher and lead gainers in the S&P 500 and Dow Jones Industrials after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $450. Also, Humana HUM is up more than +5%, and Centene CNC and Elevance Health ELV are up more than +4%. In addition, Cigna Group CI and CVS Health CVS are up more than +3%, and Cardinal Health CAH is up more than +2%.

PVH Corp PVH is down more than -27% after forecasting 2027 adjusted EPS of $11.80 to $12.10, weaker than the consensus of $12.24.

Ciena Corp CIEN is down more than -19% to lead losers in the S&P 500 despite reporting better-than-expected Q2 earnings, as Bloomberg Intelligence said the company’s full-year sales outlook may be viewed as underwhelming amid heightened expectations.

Five Below FIVE is down more than -10% despite reporting stronger-than-expected Q1 earnings results, as Jeffries said the company’s growth rate might be peaking.

Brown-Forman (BF.B) is up more than +4% after reporting Q4 gross margin of 62.6%, stronger than the consensus of 57.5%.

Medtronic Plc MDT is up more than +4% after BTIG LLC upgraded the stock to buy from neutral with a price target of $90.

RTX Corp RTX is up more than +3% after Jeffries upgraded the stock to buy from hold with a price target of $220.

Alnylam Pharmaceuticals ALNY is up more than +2% after entering into a strategic AI collaboration with Inceptive Nucleics valued at up to $2 billion to accelerate the discovery and design of RNAi therapeutics.

Brown-Forman Corp (BF/B), Ciena Corp (CIEN), Cooper Cos Inc/The (COO), Docusign Inc (DOCU), Guidewire Software Inc (GWRE), Lululemon Athletica Inc (LULU), Rubrik Inc (RBRK), Samsara Inc (IOT), Toro Co/The (TTC).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.For more information please view the Barchart Disclosure Policy here.